53 Cal.App.5th 1201
Cal. Ct. App.2020Background
- Eisenberg contracted with Suffolk to build a 108‑unit assisted living facility; the written contract listed Suffolk’s California license number and required license‑related disclosures.
- Suffolk’s designated responsible managing employee (RME), Gregory Hescock, transferred to Massachusetts in late 2008 but remained listed as Suffolk’s qualifying RME; Suffolk completed construction in June 2010 and was paid ≈ $49M.
- Post‑completion hot‑water problems led to remediation efforts, citation by the Dept. of Social Services, mediation, and a tolling agreement between Eisenberg and Suffolk.
- Eisenberg sued the project architect in 2013, added Suffolk in 2014 for breach/negligence, and in May 2015 added a Business & Professions Code §7031(b) disgorgement claim (seeking all compensation paid to an allegedly unlicensed contractor).
- Suffolk moved for summary adjudication arguing the §7031(b) disgorgement claim was time‑barred by the one‑year statute for penalties/forfeitures (CCP §340(a)); the trial court granted summary adjudication and judgment for Suffolk.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which statute of limitations applies to a §7031(b) disgorgement claim? | §7031(b) is restitution-like; apply a 4‑year (CCP §343 or B&P §17200 analog) or 3‑year (CCP §338(a)) limitation. | §7031(b) disgorgement is a statutory penalty/forfeiture; apply the 1‑year period in CCP §340(a). | CCP §340(a) (one year) applies because §7031(b) disgorgement functions as a penalty, not pure restitution. |
| When does a §7031(b) claim accrue and does the discovery rule apply? | Discovery rule applies; Eisenberg didn’t know of the licensing defect until counsel’s 2015 investigation, so claim is timely. | Discovery rule should not apply to §7031(b) (an equitable rule) and facts were publicly accessible; accrual occurred on cessation/completion of performance. | Discovery rule does not apply to §7031(b); claim accrues when the unlicensed contractor completes or ceases performance. Eisenberg’s 2015 claim was therefore untimely. |
Key Cases Cited
- MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc., 36 Cal.4th 412 (2005) (characterizes §7031 sanctions as severe/all‑or‑nothing and discusses scope of §7031).
- Clark v. Superior Court, 50 Cal.4th 605 (2010) (defines restitution versus penalty; restitution aims to restore status quo).
- Fox v. Ethicon Endo‑Surgery, Inc., 35 Cal.4th 797 (2005) (general accrual rule: cause of action accrues when complete with all elements).
- Norgart v. Upjohn Co., 21 Cal.4th 383 (1999) (formulation of the discovery rule: accrual postponed until plaintiff suspects factual basis).
- Jolly v. Eli Lilly & Co., 44 Cal.3d 1103 (1988) (discovery rule: limitations run when plaintiff should suspect injury caused by wrongdoing).
- Shively v. Bozanich, 31 Cal.4th 1230 (2003) (discovery rule applies where injury or its cause is hidden or difficult to detect).
- Neel v. Magana, Olney, Levy, Cathcart & Gelfand, 6 Cal.3d 176 (1971) (plaintiff’s ignorance generally does not delay statute running).
- Asdourian v. Araj, 38 Cal.3d 276 (1985) (recognizes severity of §7031 sanctions in construing statute).
- White v. Cridlebaugh, 178 Cal.App.4th 506 (2009) (discusses legislative purpose of §7031(b) to prevent evasion of contractors’ law civil penalties).